Auto Firms Poised to Raise Small Car Output if Needed

Auto executives said they are confident that the U.S. industry can weather the current sharp rise in oil prices better than it did the oil shocks of the 1970s, but there is concern about the long-term impact on profitability if prices stay high.

The executives, speaking at an automotive conference here, said the Big Three American car builders have the flexibility to increase small car production if demand surges.

During the oil crises of the 1970s, U.S. auto makers were caught unprepared for increased demand for small cars, enabling Japanese car makers to gain a valuable foothold in the market with their fuel-efficient small vehicles.

Readiness and flexibility aside, the auto executives conceded that a major shift in the model mix from highly profitable big cars to less lucrative compact vehicles would harm profitability.

“We have the flexibility. We can handle a market shift,” said General Motors Corp. President Lloyd Reuss, referring to GM’s small-car production capacity. He said the auto maker’s factories are well-positioned to churn out greater numbers of small, fuel-efficient vehicles with four-cylinder engines, should consumer demand rise.